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2000 DIGILAW 129 (AP)

Kadiyala Seshagiri Rao v. Kanneganti Dasaiah

2000-02-23

C.V.N.SASTRY

body2000
C. V. N. SASTRY, J. ( 1 ) THE third defendant in the suit is the appellant in this second appeal. The suit was filed for dissolution of the first defendant-firm, for rendition of accounts by defendants 2 and 3 who are the managing partners and for payment of the amounts found to be due to the plaintiff. It is not dispute that the plaintiff and defendants 2 to 14 are the partners of the first defendant-firm. The firm was constituted in 1960. Ex. A. 1 is the partnership deed dated 30-9-1960. The partnership deed shows that defendants 2 and 3 were the managing partners. The partnership was formed for the purpose of carrying on business or purchase and sale of paddy and also rice after hulling the same, to purchase ground-nut and sell groundnut oil after extracting the same and also groundnut cake, kernel etc. , obtained therefrom and to deal in any other commodity as may be agreed upon by partners either on own account or on commission basis. The suit was filed on 16-11-1963 on the allegations that in spite of the plaintiff s demands to render proper accounts of the business of the done by the partnership, defendants did not pay any heed and that after a great deal of persuasion and pressure, defendants 2 and 3 showed the accounts which were being allegedly maintained by them. Then it was discovered that the accounts are not properly maintained and that great fraud was played by defendants 2 and 3 who included their private trade of turmeric also in the account books of the firm while there was no agreement between the partners that trade should be conducted in turmeric and that the first defendant-firm has nothing to do with the said business in turmeric. Defendants 2 and 3 filed separate written statement denying the several allegations made by the plaintiff and contending that though they were styled as managing partners in the partnership deed, the business was actually conducted and carried on by the plaintiff s son Mallikarjuna Rao and the 5th defendant. It was also contended by them that the business in turmeric was also carried on by the firm with the consent of all the partners. It was further contended that the accounts were being regularly maintained and they were also settled every year. It was also contended by them that the business in turmeric was also carried on by the firm with the consent of all the partners. It was further contended that the accounts were being regularly maintained and they were also settled every year. The trial Court granted a preliminary decree for dissolution of the firm and for rendition of accounts by defendants 2 and 3 holding that defendants 2 and 3 were the managing partners and they, in fact, managed the business, that the accounts were not properly maintained by them and that the trade in turmeric; was not carried on with the consent of all the partners as pleaded by them. Questioning the decree of the trial Court, the third defendant filed an appeal impleading only the plaintiff and the 7th defendant as parties to the appeal. The appellate Court, concurring with the findings of the trial Court, dismissed the appeal. Hence this second appeal by the third defendant. ( 2 ) SRI V. S. R. Anjaneyulu, learned counsel for the appellant sought to assail the judgments of both the Courts below by contending that the Courts below committed a gross error of law in holding that defendants 2 and 3 have no authority to carry on business in turmeric in view of Clauses 4 and 9 of the Partnership deed and Sections 18 and 19 of the Indian Partnership Act. He further contended that when the accounts of the firm show that business in turmeric was actually carried on and no objection was raised by the plaintiff or any other partners at any time before the suit was filed, it must be deemed that the said business in turmeric was carried on with the consent of all the partners. In support of the said contentions, the learned counsel for the appellant placed reliance on the decisions reported in Sanganer Dal and Flour Mill v. F. C. I. , AIR 1992 SC 481 and Raghavaveera Sons v. Mrs. Padmavathi, AIR 1978 Mad 81 . In support of the said contentions, the learned counsel for the appellant placed reliance on the decisions reported in Sanganer Dal and Flour Mill v. F. C. I. , AIR 1992 SC 481 and Raghavaveera Sons v. Mrs. Padmavathi, AIR 1978 Mad 81 . ( 3 ) ON the other hand, Sri V. L. N. G. K. Murthy, learned counsel appearing for the plaintiff/first respondent has raised a preliminary objection with regard to the maintainability of the Second Appeal by contending that as the decree granted was a joint and several decree against defendants 2 and 3 in favour of the plaintiff and the other partners, in the absence of any appeal against the decree by the 2nd defendant and as the 3rd defendant filed the appeal impleading only the plaintiff and the 7th defendant as respondents without impleading the remaining partners, the appeal is incompetent. As a part of the same submission, the learned counsel further contended that if this Second Appeal were to be allowed, there will be conflicting decrees and for this reason also, the Second Appeal is not maintainable. On the merits of the case, the learned counsel submitted that both the Courts below on a consideration of the evidence on record found as a fact that the business in turmeric was carred on by the defendants 2 and 3 without the consent and the authority of the other partners and that the said concurrent finding of fact is not amenable for interference in the Second Appeal. He also contended that as the specific plea put-forward by the defendants 2 and 3 that they carried on the business in turmeric with the express consent and agreement of the other partners has been disbelieved, it is not open to them to fall back on the theory of implied authority. ( 4 ) SO far as the preliminary objection raised by the learned counsel for the respondent is concerned, it may be mentioned that this objection was not at all raised before the lower appellate Court and it is sought to be raised for the first time in the Second Appeal. ( 4 ) SO far as the preliminary objection raised by the learned counsel for the respondent is concerned, it may be mentioned that this objection was not at all raised before the lower appellate Court and it is sought to be raised for the first time in the Second Appeal. That apart in view of Order 41, Rule 4, C. P. C. which provides that where there are more plaintiffs for more defendants than one in a suit, and the decree appealed from proceeds on any ground common to all the plaintiffs or to all the defendants, any one of the plaintiffs or of the defendants may appeal from the whole decree, and thereupon the Appellate Court may reverse or very the decree in favour of all the plaintiffs or defendants, as the case may be, I do not find any substance in the preliminary objection raised by the learned counsel for the respondent and it is, therefore rejected. ( 5 ) COMING to the main question raised in the Second Appeal, it is to be seen that Clause (4) of the Partnership deed Ex. A-1 provides that the nature of the business of partnership shall be to deal in purchase and sale of paddy and also rice after hulling the same, to purchase ground nut oil after extracting the same and also groundnut cake, Kernal etc. , obtained there from and to deal in any other commodity as may be agreed upon by partners either on own account or on commission basis. Clause (9) provides that defendants 2 and 3 shall have the general power and authority on behalf of the firm to enter into all contracts and documents relating to purchase and sales, to incur necessary expenses, to appoint necessary staff, to supervise over the work and to see that proper books of accounts are maintained with vouchers etc. , to deal with all Government matters, to borrow funds from other on behalf of the firm whenver necessary; and to all other acts and things usual, necessary, expedient and incidental to the business and management of the firm. ( 6 ) SECTION 18 of the Indian Partnership Act, 1932 postulates that subject to the provisions of this Act, a partner is the agent of the firm for the purposes of the business of the firm. ( 6 ) SECTION 18 of the Indian Partnership Act, 1932 postulates that subject to the provisions of this Act, a partner is the agent of the firm for the purposes of the business of the firm. Section 19 deals with the implied authority of the partner as agent of the firm. Sub-section (1) states that subject to the provisions of Section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his "implied authority". Sub-section (2) which specifies the acts which do not fall with in the implied authority of a partner is not relevant for our purpose. Section 20 provides that partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partner. It further provides that notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner. Section 21 deals with the partner s authority in an emergency. Section 22 prescribes the mode of doing the act to bind the firm. It provides that in order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm. Section 23 provides that an admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of business. Section 23 provides that an admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of business. ( 7 ) IN ( AIR 1992 SC 481 ) (supra) it was held that :"where a contract was entered into by one of the partners of the firm with the Finance Corporation for supply of Dal, the contract would be binding on the other partners of the firm when validity of the contract or authority of the partner to enter into contract was not denied by other partners nor any objection was raised as to appropriation by Corporation of security deposit made by the firm showing that they hae ratified the contract. . . . . . . . . . . . . . . . . . . It was more so when it was not the case of the partners that the firm was not carrying on the business of the supply of Dal and that partner was authorised to do business on behalf of the firm. " ( 8 ) THIS case is easily distinguishable on facts from the case on hand. There it was not disputed that the firm was carrying on the business of supply of Dal and that the partner was authorised to do business on behalf of the firm. But in the instant case, the authority of defendants 2 and 3 to carry on business in turmeric is specifically disputed. Further, Clause (4) of the Partnership deed specifies the business to be carried on by the firm. The said clause also postulates that to carry-on business in any other commodity, agreement of the other partners is required. When the clause in the Partnership Deed makes such an express provision for carrying-on business in any other commodity only with the agreement of the other partners and when both the Courts below on a consideration of the evidence on record concurrently found that the business in turmeric was carried on by defendants 2 and 3 without the consent or agreement of the other partners, I am of the view that it is not open to the appellant to fall back on the theory of implied authority. It is manifest from a reading of sub-section (1) of Section 19 of the Partnership Act that the implied authority of a partner is applicable only to such an act of the partner which is done to carry-on, in the usual way, business of the kind carried on by the firm. It cannot, therefore, be extended to the act of carrying on a new business without the agreement of the other partners. Further, the case of defendants 2 and 3 was that even though they were styled as managing partners in the Partnership deed. they did not actually carry-on the business of the firm or maintain the accounts and the same were actually handled by the plaintiff s son and the 5th defendant. This plea also has been found against them by both the Courts below. The positive case set-up by them in a way goes against this theory of implied authority. That apart, this contention was not put-forward in both the Courts below and it is put-forward for the first time in the Second Appeal. For the aforesaid reasons, I am unable to accept the submissions made by the learned counsel for the appellant which at first sight appear to be rather attractive. The other decision relied on by the learned counsel for the appellant ( AIR 1978 Mad 81 ) (supra) also does not throw much light on the question involved in this case. There it was held that the partner of a non-trading firm has not implied authority to bind the firm by his individual act. ( 9 ) FOR the foregoing reasons, the Second Appeal fails and it is dismissed, but without costs. Appeal dismissed.